This article is from the Australian Property Journal archive
UK-based student accommodation developer Scape has paid $35 million for a Melbourne CBD site, exceeding the $20 million reserve and setting a new record land rate of $37,154 per sqm for a major development site in the city.
/* Style Definitions */
table.MsoNormalTable
{mso-style-name:”Table Normal”;
mso-tstyle-rowband-size:0;
mso-tstyle-colband-size:0;
mso-style-noshow:yes;
mso-style-priority:99;
mso-style-qformat:yes;
mso-style-parent:”;
mso-padding-alt:0cm 5.4pt 0cm 5.4pt;
mso-para-margin:0cm;
mso-para-margin-bottom:.0001pt;
mso-pagination:widow-orphan;
font-size:10.0pt;
font-family:”Times New Roman”,”serif”;
mso-fareast-language:EN-US;}
Located at 212-222 La Trobe and 17-25 Little La Trobe streets, the 942 sqm site currently comprises two, three-level, interconnected office buildings. It was sold with a permit for two residential towers of 54 and 39 levels, comprising 400 apartments plus ground level retail space.
The latest sale highlights the significant growth in CBD land values over the past year when compared to the neighbouring 3,200 sqm site at 250 La Trobe St, which was snapped up by Malaysia`s UEM Sunrise just 18 months ago for $43.15 million purchase, at a rate of $13,500 per sqm.
Scape, which is backed by the $800 billion Dutch pension fund APG, intends to develop the property in conjunction with its neighbouring landholding at 393 Swanston St, which it recently received approval for a 45 level student accommodation building.
The record deal was handled by Savills directors Nick Peden and Clinton Baxter, who recently sold another site at 229-241 Franklin St to Singaporean student accommodation developer Iglu for $19.2 million.
Peden said the property attracted a huge level of interest from local and offshore developers, because it is adjacent to RMIT University and the obvious benefit of planning approval for a major development.
“We had an enormous level of enquiry with 15 separate offers to purchase from Malaysian, Singaporean, Chinese and local developers.
“This has been an unequivocal demonstration of the extraordinary depth of the current market for CBD sites, culminating in what is a new sqm land record for the CBD,” Peden said.
Baxter said the current robust state of the market was best illustrated by comparison with UEM Sunrise’s $43.15 million purchase of the neighbouring 3,200 sqm site at 250 La Trobe St just 18 months ago at a rate of $13,500 per sqm.
“In some cases CBD land values have tripled in just a few years.
“It has become very apparent that developers are now prepared to pay a significant premium to secure sites that came with an existing planning permit.
“There is deep feeling throughout the development community about the delays and difficulty in securing a planning permit for prime CBD and city fringe sites, therefore immense developer demand is focussed on sites with permits to avoid the considerable planning risk and uncertainty of permit applications and this is leading to an escalation in values for such sites,” Baxter said.
Savills are also expecting strong competition for the upcoming sale of 319-325 Swanston St.
Baxter and Peden are selling the corner site located adjacent to Melbourne Central shopping centre. Currently it comprises a fully leased three-level retail property, returning net income of approximately $1,013,900 per annum.
The property is expected to fetch in excess of $20 million.
Baxter said the building had been demolished behind the front facades and fully reconstructed in 2014 before being re-let to five separate, well-performing tenants with eight to 10-year leases and an average remaining tenancy of 8.4 years.
“This is a perfect opportunity for an investor to secure a super-prime CBD retail investment property in one of the very best positions in Melbourne’s CBD. The property is ideally placed to benefit from the huge influx of residents, students and tourists into the immediate area over coming years.”
“We expect the property to sell for well over $20 million, representing compelling value given the exceptional rental return and position of the property,” Baxter said.
Peden said the timing of the sale provided buyers with tremendous confidence knowing that such properties were becoming increasingly scarce.
“There are obvious benefits of buying into that market including the spin-off effects that surging population has on adjacent retail properties,” Peden said.
The property will be sold by Expressions of Interest closing Wednesday, July 15.
Australian Property Journal
